TO: Mayor and Members of City Council
THRU: Kelly Olivera, Assistant City Manager
FROM: Christopher Cauley, MPA - Economic & Community Development Director
Jeffrey M. Morin - Housing Program Manager
DATE: February 12, 2024
RE:
Title
Approval of Updated Liberty Springs Apartments Affordable Housing Rehabilitation Loan Commitment Letter
end
COUNCIL DISTRICT(S):
Council District(s)
District 2 - Council Member Malik Davis
b
Relationship To Strategic Plan:
GOAL IV: The City of Fayetteville will be a highly desirable place to live, work and recreate.
• 4.5: To ensure a place for people to live in great neighborhoods
• 4.6: To reduce poverty and homelessness
Executive Summary:
Liberty Springs Apartments is an 8 unit property located at 238 S. Cool Spring Street that has been vacant for several years. The proposed repayment terms are 1% interest rate, over a 15-year term. The loan will be amortized over 30-years, resulting in a final balloon payment. City Council is asked to authorize a loan commitment letter and subsequent loan documents, with adjusted terms, in the amount of $380,500 from Home Investment Partnership Funds (HOME) to rehabilitate this property and activate 8 units of affordable efficiency and one-bedroom apartments. This commitment will be good until June 30, 2024, with a six-month extension allowed at the Economic and Community Development Director’s discretion.
Background:
Incrementum Properties LLC. is a private developer producing 8 rental units by renovating an existing property. The property has previously been declared a nuisance property by the City and substantial rehabilitation is needed to bring up to current requirements. Funding in the amount of $380,500 would come from the City’s annual allocation of HOME funds, the development requires a 1% interest loan with a 15 year term in an amount that is fully amortized over 30 years. The borrower will be expected to pay a balloon payment at the 15th year or extend the affordability. On October 23, 2023, City Council approved funding for this project at 2% over 30 years.
Issues/Analysis:
The commitment letter, with adjusted terms, will be used to draft the legal documents to secure the City’s investment. These documents will be executed at loan closing where the City will be represented by Banks Law Firm as outside legal counsel. The adjusted terms have been requested by the borrower due to concerns on long term affordability restrictions and the inflationary costs of operations. These terms are still within the Federal guidelines for investment in affordable housing.
Budget Impact:
No impact on the budget as funds for this project were previously approved on October 23, 2023, and are still available from the HOME Investment Partnership through the Department of Housing and Urban Development. Repayment of funds is treated as program income and revolved into the program to provide additional funding for future projects.
Options:
• Authorize a loan commitment letter and subsequent loan documents, with adjusted terms, in the amount of $380,500 from HOME Funds to Liberty Springs Apartments.
• Do not authorize a loan commitment letter and subsequent loan documents, with adjusted terms, in the amount of $380,500 from HOME Funds to Liberty Springs Apartments.
• Direct Staff to some other action.
Recommended Action:
Staff recommends that Council move to authorize a loan commitment letter, with adjusted terms, and subsequent loan documents in the amount of $380,500 from HOME Funds to Liberty Springs Apartments.
Attachments:
Liberty Springs Apartments Commitment Letter 2.12.2024